One-year retail tenders are promoting a ‘downward liquid milk price spiral’ and they must be addressed to ensure a viable future for winter milk production, according to the IFA.
This was just one of a number of measures outlined by the IFA as it launched its Milk Wise 2025 strategy today, March 28.
One-year retail tenders for private label supplies have been adopted by some of the main retailers in Ireland, the IFA said.
These see all dairies pitted against each other every 12 months, and have clearly promoted a downward wholesale and farmer price spiral, it added.
The one-year retailer tenders represent the very opposite of sound commercial relationships, according to the IFA.
Wild swings in supply arrangements between dairies and retailers are invisible to consumers, but incredibly disruptive on the market place, and very damaging to farmers, it added.
Review of contractual arrangements
The associations’s strategy also highlights the need for a complete review of farmers’ contractual arrangements, including pricing systems.
These contracts create major instability in the sector, the IFA said.
We believe contracts should include multi-annual commitments giving farmers security, and providing for a fair share of stable returns from the retail market, which can vary to offset volatile base milk prices.
“We further believe farmers should not be asked to sign contracts at a point in time that precedes the decision-making process on the winter remuneration,” it added.
‘Winter Milk Production a long-term commitment’
The issue of one-year retail tenders in winter milk production was also echoed by liquid milk producer Jim Mulhall.
Attending the launch of the IFA’s strategy, the Co. Kilkenny farmer said these short-term contracts represent the biggest challenge for liquid milk producers like himself.
“With the 12-month contracts at retail level, the cow could already be in-calf; I mean you can’t tell her not be in-calf and not to supply milk in the autumn time.
But all of a sudden we could lose that contract, through no fault of our own, based on a decision outside the farm gate.
“It makes life very difficult inside the farm gate if contracts are constantly changing outside the farm gate.
“Farmers will exit the business; they will get tired of flip-flopping. They will just switch to a spring system,” he said.